Cisco slumps, but above earlier levels

ExciteAtHome drops; Yahoo eases; stock futures bounce

EmilyChurch

NEW YORK (CBS.MW) - Shares of Cisco Systems dropped in pre-open trading Tuesday after the networking giant warned of a fiscal third quarter shortfall and the need to cut nearly 20 percent of its workforce.

The stock
CSCO, +0.37%
slid $1.21, or 7 percent, to $15.99, but was above earlier levels. After the close on Monday, Cisco stunned the market saying revenue for the period would plunge 30 percent from its sequential second quarter to $4.69 billion and earnings per share would be in the "very low single-digit range." Analyst surveyed by First Call/Thomson Financial had been expecting revenue of $5.95 billion and EPS of 8 cents.

Cisco also said that it would need to cut as many as 8,500 jobs, some 500 more than outlined in its first warning in March. See full Cisco story. "The challenges in terms of projecting global business have never been more difficult," said John Chambers, Cisco's chief executive.

Analyst Michael Ching of Merrill Lynch isolated Cisco's intentions to take a $2.5 billion excess inventory charge as an indication of the magnitude of the slump in demand. "The size of this charge reflects both much weaker demand forecasted over the next 12 months as well as the costs for certain commitments that Cisco felt obliged to fulfill," Ching said.

Feeling the ripple effects were electronic manufacturing services providers, which Lehman Bros. notes has "significant" exposure to Cisco. Jabil Circuit
JBL, +0.19%
lost $1.97 to $23.15, Flextronics
FLEX, -0.54%
lost 76 cents to $18.55 and Sanmina
SANM, +0.42%
was down $1.40 at $21 over the Redibook ECN. Lehman analyst Chris Whitmore says Cisco accounts for 20 percent of Jabil's revenue, and 10 percent for both Flextronics and Sanmina.

In other companies with exposure to Cisco, Broadcom
BRCM
was down $1.21 to $29.90, Applied Micro Circuits
AMCC, -3.87%
dropped $1.24 to $18.75 and PMC-Sierra
PMCS
was $1.51 lighter at $25.39 in the pre-open.

ExciteAtHome
ATHM, -0.86%
tumbled 93 cents, or 19 percent, to $3.94. The broadband services provider warned it expects to miss the consensus estimate for first quarter losses per share by at least one cent a share. The company said cash and short-term investments fell to $105 million as of March 31 from $201 million on Dec. 31, 2000.

A second-quarter warning on Tuesday from Philips
PHG, +0.37%
Europe's largest electronics company, added to the gloom surrounding U.S. shares. Philips shares tumbled $3.68, or 13 percent, to $24.57 over Redibook, after the firm said it was cutting 7,000 jobs. See full Philips story.

Yahoo
YHOO, +0.85%
slipped 62 cents to $17. The Web portal named Terry Semel as its new chairman and chief executive, effective May 1. Previously, Semel spent 24 years at Warner Bros. See full story.

Enron
ENE, +0.00%
tacked on $2.06 to $61.50 over Redibook. The energy conglomerate reported first-quarter earnings of 47 cents per share, 2 cents ahead of the average analyst estimate. Revenue jumped 281 percent in the period to $50.1 billion. The company also said it experienced a seven-fold increase in broadband network services delivered during the quarter. Looking ahead, Enron forecast recurring earnings of $1.75 to $1.80 a share for 2001, compared with expectations of $1.75.

Vitesse Semiconductor
VTSS
lost $1.30 to $22.75. The integrated circuit maker reported late Monday fiscal second-quarter earnings of 10 cents a share, meeting downwardly revised analyst expectations. Revenue was $121.8 million, up 21 percent over the same period last year, but it market the first time in more than eight years that it fell sequentially.

Winstar Communications
WCII
plunged 17 cents, or 49 percent, to 18 cents in active pre-open trading. The struggling fixed-wireless carrier said in a statement late Monday that it did not make $75 million in interest payments on debt due that day. Winstar said it has 30 days to make the payments. The company said it's hired the Blackstone Group to help restructure its debt. Winstar added that it's "considering all appropriate actions, including the possibility of a reorganization under Chapter 11 of the U.S. Bankruptcy Code."

Among other stocks seeing activity, Intel
INTC, +0.17%
eased 57 cents to $25.73. The chip giant is slated to unveil first-quarter results after the closing bell. Analysts polled by Multex expect the chip giant to earn 15 cents a share on revenue of $6.5 billion, on average.

Fellow chip maker Texas Instruments
TXN, -0.19%
shed 61 cents to $32.40 over Redibook. The company is set to announce that it would lay off 2,000 workers, or about 4.7 percent of its worldwide workforce, reflecting softer demand for its chip products amid a slowing economy, the Wall Street Journal reported. The company is also scheduled to report quarterly results after the close, with analysts expecting EPS of 16 cents on sales of $2.4 billion.

Skechers
SKX, -1.20%
rallied $2.80, or 11 percent, to $28 over Redibook. The shoemaker said late Monday that first-quarter earnings should exceed analysts' estimates of 29 cents per share by 20 percent. During the same quarter last year, the footwear company earned 19 cents a share.

Also seeing activity, Microsoft
MSFT, +1.57%
was down 29 cents at $60.50, Sun Microsystems
SUNW, +0.90%
gave up 37 cents to $15.97 and JDS Uniphase
JDSU
was knocked 90 cents lower to $19.

Stock futures indicated that U.S. share markets would start the day entrenched in negative territory. June S&P futures fell 5.00 to 1,177.00, which was about 10 points below fair value, according to figures provided by HL Camp & Company. Nasdaq 100 futures were down 9.50 at 1,618.50, but were well above previous levels.

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